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An Empirical Investigation of Gaming Responses to Explicit Performance Incentives

  • Pascal Courty

    (London Business School)

  • Gerald Marschke

    (University at Albany)

This article studies a particular kind of gaming responses to explicit incentives in a large government organization. The gaming responses we consider occur when agents strategically report their performance outcomes to maximize their awards. An important contribution of this work is to examine whether this behavior diverts resources (e.g., agents' time) from productive activities or whether it simply reflects an accounting phenomenon. We evaluate the efficiency impact of the behavior we identify and find that it has a negative impact on the true goal of the organization.

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File URL: http://dx.doi.org/10.1086/380402
File Function: main text
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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 22 (2004)
Issue (Month): 1 (January)
Pages: 23-56

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Handle: RePEc:ucp:jlabec:v:22:y:2004:i:1:p:23-56
Contact details of provider: Web page: http://www.journals.uchicago.edu/JOLE/

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  1. Paul Oyer, 1998. "Fiscal Year Ends and Nonlinear Incentive Contracts: The Effect on Business Seasonality," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 149-185.
  2. Murphy, Kevin J., 2000. "Performance standards in incentive contracts," Journal of Accounting and Economics, Elsevier, vol. 30(3), pages 245-278, December.
  3. Brown, Keith C & Harlow, W V & Starks, Laura T, 1996. " Of Tournaments and Temptations: An Analysis of Managerial Incentives in the Mutual Fund Industry," Journal of Finance, American Finance Association, vol. 51(1), pages 85-110, March.
  4. James J. Heckman & Jeffrey A. Smith & Christopher Taber, 1996. "What Do Bureaucrats Do? The Effects of Performance Standards and Bureaucratic Preferences on Acceptance into the JTPA Program," NBER Working Papers 5535, National Bureau of Economic Research, Inc.
  5. Cragg, Michael, 1997. "Performance Incentives in the Public Sector: Evidence from the Job Training Partnership Act," Journal of Law, Economics and Organization, Oxford University Press, vol. 13(1), pages 147-68, April.
  6. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
  7. Healy, Paul M., 1985. "The effect of bonus schemes on accounting decisions," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 85-107, April.
  8. Howard S. Bloom & Larry L. Orr & Stephen H. Bell & George Cave & Fred Doolittle & Winston Lin & Johannes M. Bos, 1997. "The Benefits and Costs of JTPA Title II-A Programs: Key Findings from the National Job Training Partnership Act Study," Journal of Human Resources, University of Wisconsin Press, vol. 32(3), pages 549-576.
  9. Judith A. Chevalier & Glenn D. Ellison, 1995. "Risk Taking by Mutual Funds as a Response to Incentives," NBER Working Papers 5234, National Bureau of Economic Research, Inc.
  10. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  11. Austan Goolsbee, 2000. "What Happens When You Tax the Rich? Evidence from Executive Compensation," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 352-378, April.
  12. W. Norton Grubb & Lorraine M. McDonnell, 1996. "Combatting program fragmentation: Local systems of vocational education and job training," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 15(2), pages 252-270.
  13. repec:sae:ilrrev:v:43:y:1990:i:3:p:89-106 is not listed on IDEAS
  14. Kathryn H. Anderson & Richard V. Burkhauser & Jennie E. Raymond, 1993. "The Effect of Creaming on Placement Rates under the Job Training Partnership Act," ILR Review, Cornell University, ILR School, vol. 46(4), pages 613-624, July.
  15. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
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